Lies, deceit, theft and crime in general does indeed pay-look at GM's
theft of taxpayer money.
GM Borrows Another $4 Billion As Bankruptcy Filing Looms
General Motors on Friday borrowed another $4 billion from the U.S.
Treasury and won a cost-cutting deal from Canadian auto workers as a
showdown with bondholders set the stage for a bankruptcy filing by the
end of the month.
The latest emergency funds extended by the Obama administration take the
total government funding to keep GM afloat since the start of the year
to $19.4 billion.
GM said it expected that total to rise to $27 billion after June 1, a
government-imposed deadline for the embattled automaker to achieve a
sweeping restructuring analysts say will require bankruptcy to complete.
The tentative agreement with the Canadian Auto Workers union, if
ratified, would reduce hourly compensation costs by about 28 percent
after including a round of concessions the union agreed to give in March.
A day earlier, GM won similar concessions from the United Auto Workers
to reduce operating costs and pay the union in stock instead of cash to
fund a retiree healthcare trust.
Along with plans to drop dealers and unprofitable brands like Hummer,
Saturn, Pontiac, Saab and Opel, the pair of labor deals would help clear
the way for GM to enter bankruptcy protection with the backing of the
"All of our discussions that we had, it's very likely that they will go
into Chapter 11," CAW President Ken Lewenza said at a Toronto news
conference to announce the union's tentative contract agreement with GM.
In Europe, GM also appeared to be nearing a resolution of its
long-running effort to find a buyer for its Opel unit.
Magna International emerged as the favorite to acquire Opel after top
German officials said the Canadian car parts group had submitted a
better plan than rival bidders Fiat and Belgian-listed private equity
investor RHJ International.
GM faces a June 1 deadline to restructure its debt and operations and
has said it could file for bankruptcy if it fails to get bondholders to
agree to forgive some $24 billion -- or 90 percent -- of the amount they
Under Obama administration orders, GM has offered bondholders a 10
percent stake in a restructured company.
A spokesman for a committee representing GM bondholders said
institutional investors solidly oppose that offer as insufficient.
"It's been a universal no from the get-go," said Nevin Reilly, a
"Bondholders are being seen as speculative bad guys; but bondholders are
investors, many of whom put their retirement money into GM."
Creditors have complained their rights have been ignored in the
restructuring of both GM and its smaller rival Chrysler, which has been
operating in bankruptcy since April 30.
GM and Chrysler plan to drop about 2,400 U.S. dealerships, a move
criticized by some U.S. lawmakers. Critics argue that the Obama
administration has favored the position of unionized auto workers and
has run roughshod over claims from other creditors in the process.
Four Republican lawmakers sent a letter of protest to Treasury Secretary
Timothy Geithner on Friday saying that the Obama administration was
undermining GM bondholders in order to favor the UAW, a political ally.
"We are extremely concerned that in the name of restructuring General
Motors, the presidential task force on the auto industry has begun
waging what some believe amounts to a war on capital," the letter said.
"Bondholders must have a seat at the table during negotiations in how
the company would be restructured," said the letter to Geithner from
Representatives Jeb Hensarling, Eric Cantor, Mike Pence and Pete Sessions.
Austan Goolsbee, a member of the White House Council of Economic
Advisers and the autos task force, said GM bondholders need to recognize
that they must sacrifice.
Goolsbee said he expects GM's restructuring efforts to run right up to
the June 1 deadline but not beyond.
"Usually these things, and as you saw with Chrysler, go right up to the
deadline," he said.
The CAW's Lewenza said the Canadian union had been told that it needed
to reach a new contract deal with GM urgently so that Obama could review
the terms of GM's business plan.
Lewenza said he was told that Obama would need to see the GM business
plan, which will include details of how many jobs it will cut, by the
The Obama administration steered Chrysler into bankruptcy on April 30
with an aim to push it through the court process within 60 days.
That bankruptcy has been watched as a kind of dry run for the more
complex reorganization expected from GM and has moved quickly so far.
The Chrysler plan is to sell substantially all of its assets to a new
company owned by Fiat, a UAW healthcare trust, and the U.S. and Canadian
Fiat, Chrysler and the automaker's creditors filed court papers on
Friday in support the planned sale and urged a federal judge to reject
an appeal by a group of Indiana pension funds that have sought to have
the transaction postponed.
Fiat said in court papers that it was concerned about the "deteriorating
value" of Chrysler's assets and said a delay "could ultimately prove
fatal" to its plans.
GM shares -- which the automaker has warned could be worthless in
bankruptcy -- closed down 25 percent on Friday.
GM bonds have been trading for pennies on the dollar for months in a
sign of expected default.
GM's 8.375 percent notes due in 2003 traded on Friday at about 5 cents
on the dollar.